Freddie Archives - The Automatic Earth

Elon Musk’s cringe-inducing Twitter meltdown, the rise and fall of bitcoin, and the record-breaking oil plunge — for some 2018 can’t end soon enough. But be careful for what you wish for as the bear that has rampaged through the stock market is expected to return in the new year, according to one Wall Street strategist. “The Rolling Bear market is now better understood by the consensus; and more importantly, it is better priced, with forward price/earnings falling 18% from peak to trough. In short, while 90% of the price damage has been done by this bear, we’ve likely only served 50% of the time,” said Mike Wilson, an equity strategist at Morgan Stanley, in a note to clients.

Wilson was among the handful of market watchers to predict the recent market wipeout even as stocks were trading at record levels. “The Rolling Bear is tired from all the mauling he has done this year. However, he is likely just resting rather than hibernating,” he said. ”The final leg of this bear likely won’t come until numbers are reduced for 2019, although that should feel a lot less painful than the multiple compression stage we experienced in 2018.” The S&P 500 and the Dow Jones Industrial Average are poised to close out November in the red as worries about tighter liquidity resulting from the Federal Reserve’s interest-rate hikes and a trade war with China triggered an exodus from stocks.

Why do Fannie and Freddie atill guarantee $700,000+ loans? If they didn’t, homes would become much more affordable.

• Home Prices Have Surged, Government’s Share Of Mortgages Will Too (MW)

A federal regulator has raised the dollar amount of home loans that qualify for backing by Fannie Mae and Freddie Mac, the two giant government-sponsored enterprises. In 2019, the maximum conforming loan limit will be $484,350, the Federal Housing Finance Agency said Tuesday. That’s up 6.9% from the 2018 maximum of $453,100. The change is based on the rate of change in home prices between the third quarter of 2017 and third quarter of 2018, as measured by FHFA’s House Price Index. But in higher-priced areas, loan limits are capped at 150% of the baseline $484,350. That means Fannie and Freddie will guarantee loans up to $726,525 in roughly 100 higher-cost counties.

Raising the dollar limit on Fannie- and Freddie-backed loans is one way of lubricating the mortgage market. If banks or other lenders can sell bigger mortgages to the enterprises, that makes it easier for them to keep lending. In turn, that makes it easier for would-be buyers to find financing that is generally more advantageous than other types of mortgages, like those backed by the Federal Housing Administration. But it also increases the risk to taxpayers. Fannie and Freddie operate with only a slim capital reserve, as the result of a 2012 directive from Congress that was patched over late in 2017. The update was owed to an agreement between FHFA Director Mel Watt and the U.S. Treasury even as they continue to guarantee between 40%-50% of new mortgages. That means that in any given quarter, either company is at risk of having to take taxpayer money.

Trump senses the danger, and then ridicules himself.

• Trump Says ‘Not Even A Little Bit Happy’ With Fed’s Powell (R.)

U.S. President Donald Trump on Tuesday kept up his criticism of Federal Reserve Chairman Jerome Powell, saying rising interest rates and other Fed policies were damaging the U.S. economy, the Washington Post said. “So far, I’m not even a little bit happy with my selection of Jay,” the Post quoted Trump as saying in an interview, referring to the man he picked last year to lead the Fed. “Not even a little bit. And I’m not blaming anybody, but I’m just telling you I think that the Fed is way off-base with what they’re doing.”

In recent months, the Republican president has repeatedly criticized Powell and the Fed’s interest rate increases that he said was making it more expensive for his administration to finance its escalating deficits. Trump has called the Fed “crazy” and “ridiculous.” “I’m doing deals, and I’m not being accommodated by the Fed,” Trump told the Post on Tuesday. “They’re making a mistake because I have a gut, and my gut tells me more sometimes than anybody else’s brain can ever tell me.”

Joint defense agreements are common and fully legal, but the NY Times labels this one “highly unusual”. Summarized: Mueller was outflanked, though he could/should have known, and Manafort may be relying on a pardon.

• Manafort’s Lawyer Repeatedly Briefed Trump Attorneys On Mueller Talks (ZH)

One day after Special Counsel Robert Mueller said that Paul Manafort had lied and violated his plea agreement with Federal prosecutors, and as a result should be sentenced immediately, the NYT has reported that in a “highly unusual” arrangement, a lawyer for Paul Manafort had repeatedly briefed president Trump’s lawyer on what he told Mueller and other federal investigators after he agreed to cooperate with the special counsel. While the arrangement is not illegal, it reportedly inflamed tensions with the special counsel’s office when prosecutors discovered it after Mr. Manafort began “cooperating” two months ago, with some legal experts speculating that Manafort’s backdoor cooperation with Trump’s legal team was a bid by Trump’s former campaign chair for a presidential pardon even as he worked with Mueller in hopes of a lighter sentence.

Trump lawyer Rudy Giuliani acknowledged the arrangement to the NYT, and “defended it as a source of valuable insights into the special counsel’s inquiry and where it was headed.” Such information could help shape a legal defense strategy, and it also appeared to give Mr. Trump and his legal advisers ammunition in their public relations campaign against Mr. Mueller’s office. As an example of what Manafort told the Trump legal team, Giuliani said, Manafort’s lawyer Kevin Downing told him that prosecutors hammered away at whether the president knew about the June 2016 Trump Tower meeting where Russians promised to deliver damaging information on Hillary Clinton to his eldest son, Donald Trump Jr, although this line of investigation is hardly a surprise. Trump has long denied knowing about the meeting in advance, with Giuliani saying that Mueller “wants Manafort to incriminate Trump.”

What is notable is that this kind of joint defense agreement is legal, and while Downing’s discussions with the president’s team violated no laws, they helped contribute to a deteriorating relationship between lawyers for Manafort and Mueller’s prosecutors, who on Monday accused Manafort of holding out on them and even lying, despite his pledge to assist them in any matter they deemed relevant. As a result of the collapse of the plea deal, Manafort will now face sentencing on two conspiracy charges and eight counts of financial fraud — crimes that could put him behind bars for at least 10 years. Just as importantly, Manafort’s frequent updates helped reassure Trump’s legal team that Manafort had not implicated the president in any possible wrongdoing, which begs the question just how was Manafort “cooperating” with Mueller for two whole months.

Greenwald: “The Guardian itself “obtained the Embassy’s visitors logs in May,” and made no mention of Manafort’s visits at the time..”

Excuse me, but Greenwald and others do Luke Harding and the Guardian far too much honor by going into the details. The guy wrote a book called ‘Collusion’ for Pete’s sake. he does smear and hit pieces on Assange for a living. WikiLeaks is dead on when it says “Remember this day when the Guardian permitted a serial fabricator to totally destroy the paper’s reputation..”

Only, Harding and Guardian have published at least a dozen other stories of the same ‘level’. That reputation should be long gone. It’s not. Matrix.

• If Manafort Visited Assange There Should Be Ample Evidence (Greenwald)

The Guardian today published a blockbuster, instantly viral story claiming that anonymous sources told the newspaper that former Trump campaign manager Paul Manafort visited Julian Assange at least three times in the Ecuadorian Embassy, “in 2013, 2015 and in spring 2016.” The article – from lead reporter Luke Harding, who has a long-standing and vicious personal feud with WikiLeaks and is still promoting his book titled “Collusion: How Russia Helped Trump Win the White House” – presents no evidence, documents or other tangible proof to substantiate its claim, and it is deliberately vague on a key point: whether any of these alleged visits happened once Manafort was managing Trump’s campaign.

For its part, WikiLeaks vehemently and unambiguously denies the claim. “Remember this day when the Guardian permitted a serial fabricator to totally destroy the paper’s reputation,” the organization tweeted, adding: “WikiLeaks is willing to bet the Guardian a million dollars and its editor’s head that Manafort never met Assange.” The group also predicted: “This is going to be one of the most infamous news disasters since Stern published the ‘Hitler Diaries.’ [..] Of course it is possible that Manafort visited Assange – either on the dates the Guardian claims or at other times – but since the Guardian presents literally no evidence for the reader to evaluate, relying instead on a combination of an anonymous source and a secret and bizarrely vague intelligence document it claims it reviewed (but does not publish), no rational person would assume this story to be true.

But the main point is this one: London itself is one of the world’s most surveilled, if not the most surveilled, cities. And the Ecuadorian Embassy in that city – for obvious reasons – is one of the most scrutinized, surveilled, monitored and filmed locations on the planet.

Entirely in the vein of my article yesterday about people living in the Matrix, we need to ponder that outlets like the Guardian no longer care about their credibility, but instead rely on people swallowing whole anything they say, today about Manafort, Assange and Russian aggression, tomorrow about other topics. That is plenty scary.

• Manafort Plans To Explore “All Legal Options” Against The Guardian (ZH)

Former Trump campaign manager Paul Manafort has responded to a “totally false and deliberately libelous” report in The Guardian that he had several meetings with WikiLeaks founder Julian Assange in the Ecuadorian embassy in London. In a Tuesday afternoon statement through a spokesman, Manafort said: “This story is totally false and deliberately libelous. I have never met Julian Assange or anyone connected to him. I have never been contacted by anyone connected to Wikileaks, either directly or indirectly. I have never reached out to Assange or Wikileaks on any matter. We are considering all legal options against the Guardian who proceeded with this story even after being notified by my representatives that it was false.”

The Guardian reported on Tuesday – based on unnamed sources – that Manafort held secret talks with Julian Assange inside the Ecuadorian embassy in London, right around the time he joined Trump’s campaign. “Sources have said Manafort went to see Assange in 2013, 2015 and in spring 2016 – during the period when he was made a key figure in Trump’s push for the White House. It is unclear why Manafort wanted to see Assange and what was discussed. But the last meeting is likely to come under scrutiny and could interest Robert Mueller, the special prosecutor who is investigating alleged collusion between the Trump campaign and Russia. A well-placed source has told the Guardian that Manafort went to see Assange around March 2016. Months later WikiLeaks released a stash of Democratic emails stolen by Russian intelligence officers.” -The Guardian

If the US find someone else who obeys them, they’ll drop Poroshenko.

• Poroshenko Claims Ukraine Offered ‘Military Assistance’ By US (Ind.)

Ukraine has been offered “military assistance” by the US amid rising tension with Russia, the country’s president Petro Poroshenko has claimed. America’s secretary of state Mike Pompeo, had assured him in a phone call that his country, had the “full support, full assistance, including military assistance, full coordination, what we [need] to do to protect Ukrainian sovereignty and territorial integrity”, Mr Poroshenko said. Addressing a suggestion that Donald Trump had been slow to back Ukraine over the stand-off, the Ukrainian leader told CNN host Christiane Amanpour, that the president “in his speech, also supported Ukrainian territorial integrity and [has] been on our side” The US president had earlier said: “We do not like what’s happening either way. We don’t like what’s happening, and hopefully it will get straightened out.”

A bit overlooked perhaps. How much of a factor in the Russia aggression narrative is Nordstream 2? It would bankrupt Ukraine.

• ‘Put Putin In His Place’, Ukrainian Ambassador Tells Germany (R.)

Ukraine’s top diplomat in Germany urged Berlin and other Western states to punish Russia by extending sanctions, banning energy imports and putting the NordStream 2 gas pipeline on hold after Moscow seized three Ukrainian ships near Crimea. The ambassador even raised the possibility of sending German marines to the region. Several senior European politicians have raised the possibility of new sanctions against Russia after the incident on Sunday, which the West fears could ignite a wider conflict near Crimea, which Russia annexed from Ukraine in 2014. “Germany must take a clear line … and put (Russian President Vladimir) Putin in his place,” ambassador Andrij Melnyk told German radio on Wednesday. “Everything is at stake.”

“The club of sanctions should be wielded quickly …. There should be a complete ban on gas and oil imports from Russia, NordStream 2 must be put on ice,” he said, adding only such measures could stop Putin’s “brutal, hoooligan-like” behavior. Ukraine is already nervous about the prospect of the NordStream 2 pipeline which increases Europe’s reliance on Russian gas, fearing it will lose out on transit revenues. “In military terms, what can you do? Sending German marines to the coast of Crimea … could help stop an escalation. If you are there, Russians have fewer possibilities to act so brutally,” he said.

Anything that smells of Russia will be thrown in dungeons. That’s what it means. And Poroshenko means to stay in power.

• Ukraine Digests What Martial Law Will Mean (Ind.)

A day after the Ukrainian parliament voted to introduce martial law across 10 border regions, there was little clarity about what it would actually mean in practice. With parts of the government on different pages, and the introduction of measures that could cover most aspects of life, even family, some areas of the country bordered on panic mode. In the southern city of Odessa, there were rumours of forced mobilisation, though these turned out to be false. In other cities across the region, shortages of foreign currency were reported. The text of the law eventually voted on was considerably watered down from the edict originally presented by President Petro Poroshenko on Monday afternoon.

That contained provisions for a state of martial law lasting 60 days across the whole country. By logical extension, that would have meant delaying next March’s presidential elections, a point that caused uproar among the opposition. The eventual compromise saw a commitment to fix the date of the elections, the duration reduced to 30 days, and the zone of coverage reduced to 10 border regions. The Independent understands that these concessions were made only at the last moment, and the vote would not have passed without them. In the text agreed by the Verkhovna Rada, Ukraine’s parliament, the state of martial law was due to start on Wednesday morning at 9am local time.

But on Tuesday morning, the secretary of the national security council, Oleksandr Turchynov, said that a state of martial law was already in effect. To make matters even more complicated, the Government Courier, the state newspaper where all laws are published, printed a version of the original law, including provisions for 60 days of restrictions across all of Ukraine. [..] in the 10 border regions at least, the law potentially has a very wide scope. The presidential amendments introduce few restrictions on the overarching 2015 legislation covering martial law. In other words, it allows for extrajudicial searches of property, travel bans, closing media deemed against national interests, bans on rallies and demonstrations, limitations on private correspondence and communications, and even introducing limitations on education, private and family life.

But that’s exactly what the people voted for, they want to be worse off, and you can’t deny them their vote, that’s bad for democracy.

• Chancellor Admits UK Will Be Worse Off Under All Brexit Scenarios (G.)

Philip Hammond has admitted that the UK will be worse off “in pure economic terms” under all possible Brexit outcomes – including the prime minister’s own deal. Speaking on Wednesday morning, the chancellor gave strong hints the government had begun its contingency planning should it lose the vote in parliament on Theresa May’s Brexit deal negotiated with the EU. The latest Guardian analysis suggests 94 Tory MPs have confirmed they will vote against the deal, with numbers likely to tip into three figures in the coming days. Hammond suggested the economic hit would be mitigated if the deal was clinched, rather than the UK leaving with no deal.

Asked if all scenarios would have a cost, Hammond said: “If you look at this purely from an economic point of view, yes there will be a cost to leaving the European Union because there will be impediments to our trade.” Hammond said the deal would “absolutely minimise those costs” and would offer political benefits of being able to sign new trade deals and having new controls over fishing waters. “The economy will be slightly smaller in the prime minister’s preferred version,” he said. He said if the government loses the vote in parliament on 11 December, it would be in “uncharted political territory”. More than half of backbench Tory MPs who are not on the government payroll have committed to voting down the deal.

Monday Morning I Want My Quarter Back

• Murphy to the Rescue (Kunstler)

Ukraine verges on martial law after a naval incident with Russian ships in the waters off Crimea. Say what? Martial Law? They might as well declare a Chinese Fire Drill. Details of the actual incident around the Kerch Strait between the Black Sea and the Sea of Azov remain murky besides the fact that two Ukrainian gunships and a tug disobeyed orders from Russian ships to stand down in Russian maritime waters and shots were fired. Who knew that Ukraine even had a navy, and how can they possibly pay for it? But now NATO is trying to get into the act, meaning the USA will get dragged into just the sort unnecessary and idiotic dispute that kicks off world wars.

Note to the Golden Golem of Greatness (aka Mr. Trump): this dog-fight is none of our goddam business. Russia, meanwhile, asked the UN Security Council to convene over this, which is the correct response. What could go wrong? Late Monday update: I’ve heard reports this afternoon that Russia had intel Ukrainian ships were transporting an explosive device supplied by NATO which they suspected was intended to be deployed to blow up the strategic bridge across the Kerch Strait. Still unconfirmed chatter. Developing story….

Yesterday, about five hundred Central American migrants rushed the border at Tijuana. The US Border Patrol tear-gassed them and they backed off. Bad optics for those trying to make the case for open borders. Naturally, The New York Times portrayed this as an assault on families, defaulting to their stock sob story, though the mob assembling down there is overwhelmingly composed of young men. Complicating matters, a new Mexican president, Andrés Manuel López Obrador, takes over next Saturday, a Left-wing populist and enemy of Trumpismo. Tijuana is now choking on the thousands of wanderers who were induced to march north to test America’s broken immigration policies. What could go wrong?

The engine pulling that choo-choo train of grievance is Robert Mueller’s Russian Collusion investigation. I expect him to produce mighty rafts of charges against Mr. Trump, his family and associates, and anyone who ever received so much as a souvenir mug from his 2016 campaign. But I doubt that any of it will have a bearing on Russian election “meddling.” And in that case, the charges will be met by counter-charges of an illegitimate investigation, meaning welcome to that constitutional crisis we’ve been hearing about for two years. That’s a mild way of describing anything from a disorderly impeachment to troops in the American streets. What could go wrong there?

Don’t Buy A Home: You’ll Get Burned

Oct 272014

October 27, 2014 Posted by Raúl Ilargi Meijer at 8:28 pm Finance Tagged with: Fannie, FHFA, Freddie, homeowners, housing, mortgage, reset, Ritholtz 9 Responses »

Albert Freeman Effect of gasoline shortage in Washington, DC 1942

Europe had hundreds of inspectors check 130 banks for a year in that stress test. Who do you think picked up the tab for that? And what did Europe’s taxpayers get in return? As I’m looking right now, they got falling stocks and 3 Italian banks in which trading was halted. What was the ECB’s goal with the tests again?

Oh right, to restore confidence in the markets … Well, with WTI oil falling fast below $80, I think we can now confidently say the Boys of Brussels are either not up to the job, or they’re letting the whole caboodle rapidly drift south on purpose. Probably a bit of both.

But don’t forget that if things continue on this present path, the next thing out of Draghi et al will be about the survival of the eurozone and likely the euro itself. Which means an outcome as awful as the one we’re seeing right now may be intended to be the final straw to break the Germans’ back, and make them give up their resistance to full blown outhouse paper purchases.

Meanwhile, the ECB bought a grand total of €1.7 billion in covered bonds last week, so at that pace it will take only 587 more weeks to get to the $1 trillion in purchases they aim for. Solid plan.

Sure, oil will rebound above $80 at some point today, the blows must be softened, and European stocks will cut losses on their plunge protection services, but if there was any idea of fooling the financial markets wit the tests, that went off the rails. Still, the people in the street, aka consumers, are still plenty fooled, and maybe that was all Brussels ever wanted. After all, Draghi is Goldman, so whaddaya know, right?

But I wanted to get back to some things I noticed late last week, about US housing. Though the call to not buy a home – at least one with a substantial loan attached – is a global one. Conditions in which you would own such a home, and pay for the loan, are set to change in radical ways, and the risks of the home becoming a trap are simply too high.

More importantly, you would be paying far too much. Fannie and Freddie and the rest of the US real estate five families will loosen requirements again soon, but they don’t do that because they want to do you a favor, they do it because they are looking to smoke out the last remaining greatest fools and suckers left out there. Don’t be one.

Leave the housing industry in your country alone, for five years or so, and allow for prices to come down to a level where homes become affordable again to young people. If the industry doesn’t get to that level, it has no future anyway. If the baby boomer generation can’t sell to their children at prices the latter can afford, US housing is dead. Already, a third of sales are cash only to investment companies, and that’s not a healthy development at all. Don’t go gently into that dark night.

Alexis Leondis and Clea Benson at Bloomberg had some major lamenting last Friday on how regulations stifle the US real estate business. And I’m thinking for once Washington bureaucracy has some positive side effects, but the authors don’t agree.

For me, US and many European housing industries have gone so far off track from, pick a date, 1997 to 2007, that it needs a major correction, something the industry itself, governments and central banks have only tried as hard and as expensively as they could muster, to prevent. We know that every bubble ends at a level below where it started, and housing is nowhere near that bottom yet.

Yes, builders and contractors and lenders and servicers and owners and borrowers will all be hit hard, but what’s the use of keeping up a virtual good face it that means killing off the future of the entire industry? Besides, don’t young people everywhere deserve a shot at a future, building a family etc., without having to bend over backwards just to be allowed to live somewhere?

And I don’t just mean the happy few kids, I want the 50% unemployed youth in southern Europe to be part of this as well, and the 25% or so in the US. You can’t just put out those kinds of numbers of people by the curb and expect to have a working society, let alone housing industry. Nor should you want to. Here’s that Bloomberg thing:

Lenders Facing Soaring Costs Shutting Out U.S. Homebuyers

Clem Ziroli Jr.’s mortgage firm, which has seen its costs soar to comply with new regulations, used to make about three loans a day. This year Ziroli said he’s lucky if one gets done. His First Mortgage Corp., which mostly loans to borrowers with lower FICO credit scores and thick, complicated files, must devote triple the time to ensure paperwork conforms to rules created after the housing crash.

Question no 1: what’s wrong with doing ‘only’ one mortgage a day? Is Mr. Ziroli modeling himself after Angelo Mozilo?

To ease the burden, Ziroli hired three executives a few months ago to also focus on lending to safe borrowers with simpler applications. “The biggest thing people are suffering from is the cost to manufacture a loan,” said Ziroli, president of the Ontario, California-based firm and a 22-year industry veteran. “If you have a high credit score, it’s easier. For deserving borrowers with lower scores, the cost for mistakes is prohibitive and is causing lenders to not want to make those loans.”

[..] Federal rules put in place after the 2008 financial crisis attempt to prevent such reckless lending. The Consumer Financial Protection Bureau in January began implementing the qualified mortgage rule, a 52-page document mandating that lenders must take detailed steps to prove that borrowers have the ability to repay their mortgages. The measure also cracks down on risky loan features such as balloon payments and large fees by leaving lenders exposed to legal liability if they issue such loans.

So far, nothing that upsets me. Lenders have to be more careful about loans they issue, and that costs them a bit more, but not so much that they go out of business. So is that the problem, or is the problem that until 2007 they had thrown all caution to the wind? I think I have an idea.

“The industry as a whole did a terrible job of self-policing and they should not be shocked that there’s now more oversight than there was before,” Gordon said. The CFPB has issued eight rules since 2011 governing everything from appraisals to compensation for loan officers. Six regulators including the Federal Reserve jointly issued a 553-page document this week containing instructions for when lenders must retain a stake in mortgages that they package for sale to investors. [..]

The higher costs and concerns about buybacks are driving the decline in mortgages for home purchases. It will slow to $635 billion this year, a 13% drop from 2013, according to MBA estimates. Banks have constrained home lending to many borrowers deemed creditworthy by mortgage finance companies Fannie Mae and Freddie Mac. Applicants approved for mortgages to purchase homes had an average FICO credit score of 755 in August, according to Ellie Mae, a company that makes software used to process mortgage applications. In contrast, Fannie Mae and Freddie Mac guidelines allow for credit scores as low as 620 for fixed-rate mortgages in some cases. Lenders reported a 30% median increase in compliance costs this year from 2013 …

That’s a steep fall alright, but don’t let’s forget we came from a time of complete lunacy. And that banks are more cautious than the government agencies should perhaps tell you something about the latter. But what’s the real worry? Looks to me like a pretty normal comedown from an abnormally exultant high. Which cost everyone dearly.

Banks are passing some of the costs of compliance to borrowers. Initial fees and charges paid by consumers on agency fixed-rate purchase loans have increased 10% to 1.21% as of August compared with a year earlier [..] Smaller lenders may be hurt the most by compliance costs, said Guy Cecala, publisher of Inside Mortgage Finance, a trade publication. They have fewer resources to maintain records and train employees, which is essential to protecting lenders in the new regulatory environment, he said. “There’s no question in this newer market it’s harder for smaller lenders to survive,” Cecala said.

These lenders, which have smaller balance sheets, generally can’t hold the loans on their books and have to sell them to government agencies or investors. At 1st Priority Mortgage, based outside of Buffalo, New York, one investor who buys the company’s loans requires employees to fill out a seven-page form verifying compliance with qualified mortgage standards. Other investors each require different forms, said 1st Priority’s President Brooke Anderson Tompkins.

That last bit is typical of Washington ineptitude, but as I said, for once that works out well, and besides, US screw ups on the ebola file have far more serious implications.

Then, the same day, Barry Ritholtz whined about his own difficulties in getting a mortgage. Which of course, he got anyway, because Barry’s a Wall Street man, investor man, analyst etc. Just like Ben Bernanke got his loan refinanced after some much talked about ‘trouble’. Pardon me, but I’m much more interested in the people who don’t get things done, like anything at all.

I remember Barry as an astute guy at his Big Picture blog back when the crisis hit 7 years ago, and would have liked to see quite a bit more self-criticism, but there you go. Here’s the crux of Barry’s whine:

It Shouldn’t Hurt This Much to Get a Mortgage

Under normal circumstances, approving my mortgage application should be a no-brainer: High income, no debt, good credit score. The missus also makes a good income, has an almost-perfect credit score and has been working for the same business for 28 years. But these are not normal circumstances. Let me jump to the end: Yes, we got our mortgage. We put 20% down, bought a house that appraised for more than the purchase price and got a 3.25% rate on a mortgage that resets after seven years. We moved in last month. But the process was surreal. Indeed, it was such a bizarre experience that I started hunting for explanations from people in the industry about why mortgage lending has gone astray.

I spoke to numerous experts, many of whom spoke only on background. Today’s column is about what I learned. By just about any measure, credit is tighter today than it has been in decades. Although former Federal Reserve Chairman Ben Bernanke’s inability to refinance a mortgage is merely anecdotal, consider instead the gauge CoreLogic developed. It used 1998 as a baseline and considered six quantitative measurements to evaluate how loose or easy mortgage lending is. By those metrics, this is the tightest credit market for mortgage lending in at least 16 years.

The absurdities of my experience are worthy of its own rant, but rather than do that, I wanted to focus on what went wrong. The factors that led to the financial crisis were many …

Do read the rest at the link. My take on this is that when Barry says “credit is tighter today than it has been in decades” and “this is the tightest credit market for mortgage lending in at least 16 years”, I’m thinking not long ago he would have agreed that’s a good thing. We can argue about why this has come to pass, and blame regulation, not banks, but we all agreed in 2007 that too loose lending was a problem (both Barry and the Automatic Earth warned back then that the crisis would come, before it did a year later).

And anyway, I’m not here to show compassion with Ritholtz, I’m here because of all the other people, the young who see their dreams of a decent future cut off cold because of unemployment, low wages etc., and the old who see their pensions evaporate like so much smoke. And for both young and old, a further correction and demise of real estate will, largely – though not in every case – be a blessing. So, you’re wrong, Barry, it should hurt at least this much for you and everyone else to get a loan, if only because the pendulum was that far off its equilibrium in the other direction for so long.

Which is why I’m much more partial to what David Weidner said at MarketWatch on Thursday:

It Will Soon Get Easier To Buy A Home – But Don’t Do It

After an extended drought of credit available to consumers, it’s going to get easier to buy a home. The Federal Housing Finance Agency this week polished off a new set of guidelines that will allow government backing of loans that it had shunned since the mortgage crisis. And in a surprise move, the guidelines include a provision to consider some mortgages without down payments.

The FHFA and the Obama administration are both worried about the amount of credit available to the average American. It’s an epidemic problem. About a third of housing sales were to cash buyers in the first quarter, according to the National Association of Realtors. As I’ve written before, this is extraordinarily high, indicative of a housing market that favors the wealthy. So by lowering the standards of what types of loans are acceptable to the big mortgage giants, it’s obvious that the FHFA’s effort is about encouraging banks to provide more loans. The government is essentially saying: “Go ahead and lend; we’ll hold the paper.”

But in trying to ease credit and turn a mythic housing recovery into a real one, the FHFA may be overreaching. That’s because you know exactly who’s going to be taking out those loans: people who can’t afford them. And because there will always be some people who believe that because they can borrow, they can afford these loans, you know how this new policy is going to play out.

Consider a study issued Oct. 13 by mortgage data provider HSH.com. It found that 80% of homeowners had a regret about their purchase. Surprisingly, most of the regrets weren’t about costs. They were about the size of the home, the neighbors, the schools and other gripes. Then again, this was a post-foreclosure wave survey of 2,000 homeowners. The more than 4 million borrowers who lost their homes to foreclosure since the crisis probably weren’t asked and would have different regrets.

So, while the FHFA is certainly opening the door to another mortgage problem, it’s not ultimately the one to blame. That falls to the home buyer who bites off too much. [..] borrowers can no longer depend on banks and regulators to measure creditworthiness.

Historically, it was difficult to get a home loan. And down payments weren’t an option. They were the price of admission to the lending officer’s desk. But a series of government programs, low interest rates and tax breaks along with loosening standards at banks eroded this institutional test. So today it’s incumbent on the borrower to ask himself if he can afford the American Dream.

For many, the answer is probably “no.” [..] The FHFA will, in the end, encourage more lending. And this will translate into more credit for people who have been denied. But that policy isn’t the one that matters. It’s my policy, your policy, based on what we truly can afford that does.

Before the US, and the UK, Netherlands, Ireland, Spain and many other countries can ever have a healthy housing industry again, that industry will first have to come crashing down to levels indeed not seen in decades. Hurtful for some, beneficial for many others.

So it’s not such a bad thing if regulators choke that market, and people can’t buy properties they can only ‘afford’ is they can borrow 90%+ of the purchase price. After decades of insanity, the only way to get back to health is a severely strict diet and fitness regime. The one ultimate goal must be to make homes affordable to young people, the future of every single community and nation.

Reading through these kinds of articles, I don’t get the idea that anyone at all is aware of that, or even thinking about it. Our societies face a major economic – and therefore overall – reset, and housing is a big part of that, simply because it’s a huge percentage of the real economy. And pumping it up in artificial ways is a short term ‘policy’ that can only end in tears. It’s not exactly rocket science. If you can make a cup of coffee, you can figure this one out.